Questions – Round 2 – Phase 1

When we launched our Conversation Hub, we invited everyone to tell us what they think, or want to understand, about the Alberta royalty framework today; and to tell us what they would like the royalty review to do. After receiving hundreds of comments in the first week, we posted a summary of themes we were consistently seeing.

During the past week, we invited you to tell us if we got the gist of your responses, and if we’d missed anything. Once again, you responded to the call.

Here are some additional thoughts and themes you delivered to us. (Again, we’ve included examples of what’s being said by people ‘in their own words’.)

Tailor the Framework for Alberta

• Alberta’s royalty framework should be tailored for the unique resources that we have in the ground. For example, it should recognize that our province’s unconventional oil and gas are located in unique geology that requires special technology to extract. Keep in mind that Alberta is different from other places, with different advantages and different challenges.

“ This review panel should keep in mind at all times the characteristics and challenges of unconventional oil and gas development. ”

Remember Renewable Energy

• Renewable energy should be part of the discussion when the Panel learns about Alberta’s overall energy industry. Perhaps there’s a way that the royalty framework can be adjusted to encourage renewable energy and help Albertans realize its benefits.

“I want to know what is being done/going to be done to encourage investment and growth in renewables such as wind, solar, and geotherm. We need to make Alberta attractive to forward-thinking technology investment.”

Look at Everything Companies Will Pay

• Look at all the economic benefits Albertans already receive when assessing whether royalties should go up, down or stay the same. Before deciding what to do with the royalty framework, it’s important to see the complete picture of taxes and fees that companies pay (e.g., corporate taxes, municipal taxes, carbon charges, etc.)

“I would like to see the total industry contribution to the province’s revenue (i.e. inclusive of land sales, royalties, property taxes, direct employment in upstream, midstream and downstream corporations, and income taxes generated from all stakeholders). ”

Energy Stresses on Public Infrastructure

• Remember the stress that energy development places on public infrastructure, which might not otherwise be there. These stresses have costs to Alberta taxpayers, and royalties are a way that the public can recoup money to offset these stresses and costs.

“New projects put major demands on existing public infrastructure and often require a significant amount of construction to provide new infrastructure…Royalty levels need to be set to cover these costs in part or whole if the project is to be of value to Albertans.”

Royalties, Spending and Saving

• Alberta’s savings (such as the Heritage Fund) are much smaller compared to those of Norway. Some people say this is evidence that Alberta’s royalties have been too low. Other people say that it’s because Alberta’s royalties have been spent instead of saved. Still others say that comparisons between Alberta and Norway don’t make sense because our two jurisdictions are different.

“It is not what you make, it is what you save. ”

Also, as we sift through the hundreds of responses we’ve received, we’re finding lots of great aspirations.

Many of you have described the kinds of characteristics you’d like Alberta’s royalty framework to have in the future. Here’s a sampling:

• Attract and encourage investment — The framework should be structured so that companies still find it attractive to invest in Alberta and create jobs for Albertans.

• Forward-looking in approach — It should consider the types of resources we are most likely to produce in the future, not just the ones we’re producing today, and consider trends in investment, markets, and technologies.

• Take boom and bust into account — Oil and gas prices can be volatile, so the framework should be structured to work well during times of low prices and high prices.

• Provide certainty for investors and Albertans — The details should be clear, so that companies know what royalty rates they’ll pay and Albertans know what return we’re getting for our resources.

• Periodic review and adjustment — The royalty framework should be reviewed on a regularly scheduled basis so that it stays current.

• Consider people and the environment — Energy development needs to happen in the safest manner for people and the environment, and the framework should be structured in a way that recognizes this.

• Transparency in all calculations — Albertans should be able to see how everything works, and calculations should be verifiable so that people know things are ‘above board’.

• Encourage value-added production — The framework should encourage investors to do more oil and gas processing (e.g., refineries, petrochemical plants, etc.) within Alberta.

• Rooted in ownership, not a cash grab — The royalty framework should be based on the fact that Albertans, as owners, are entitled to royalties. It shouldn’t be used as a cash grab whenever Alberta needs more money.

• Reward investment and job creation within Alberta — As owners of the resources, Albertans should benefit the most from production, so the framework should reward companies that hire workers and buy goods and services from Alberta businesses.

• Objective and based on evidence — The details of the framework should be based on data and evidence, not anecdotes and emotions.

• Look at everything when rates are set — The framework should take into account all of the other payments and charges that energy companies will make to governments.

You might agree (or disagree) with things in this list. And you probably have some ideas of your own to add to the mix.

So tell us… What characteristics do you consider most important for Alberta ’s Royalty Framework?

Previous Question

Read the summary of responses from the first set of questions , and then consider our next question:

Information provided to Royalty Review Panel is collected under the authority of Section 33(c) of the Freedom of Information and Protection of Privacy (FOIP) Act and will be protected under provisions of the Act. Opinions, comments, responses, and submitted documents will be used as part of the Panel’s review of the Alberta Royalty Framework and may be disclosed to the public. Personal information provided will not be used or disclosed for any other purpose without consent or unless required to do so by law. Should you have any questions about the collection and use of this information, please contact Alberta’s Royalty Review Panel at [email protected], or by mail at 8th Floor, North Petroleum Plaza, Edmonton Alberta, 9945-108 Street, T5K 2G6.